COFINA: borrowing against tomorrow's sales tax

In 2006, as the Section 936 exemption disappeared and government finances tightened, the Puerto Rico legislature created a new borrowing tool. Act No. 291 established COFINA — the Corporación del Fondo de Interés Apremiante, or Puerto Rico Sales Tax Financing Corporation — as a subsidiary of the Government Development Bank.

COFINA's structure was simple on paper: it issued "Puerto Rico Sales Tax Revenue Bonds" and paid them with a dedicated slice of the government's 6% Sales and Use Tax — 2.75 percentage points, or half of the state government's share of the tax. In practice, the government borrowed against sales-tax revenue it had not yet collected, betting that consumer spending, and the tax collected on it, would keep growing enough to cover the debt.

The corporation used that tool hard. By May 2011, COFINA had issued more than $14.4 billion in bonds, with $13.4 billion of that figure still outstanding. It is an enormous sum for an island of about 3.7 million people at the time, and it sat on top of the debt the central government and other public corporations were taking on separately.

COFINA's bonds did not stay a quiet mechanism. A decade later, when the debt crisis forced a restructuring under the federal PROMESA process, COFINA bonds became one of the most litigated pieces of the entire negotiation: holders competing over how much of that future sales-tax revenue belonged to them. What was born in 2006 as a shortcut in the face of a shrinking budget became, in the 2010s, one of the central fights of Puerto Rico's fiscal adjustment.

The basic idea — borrow now against a tax collected later — is common in public finance. What made COFINA different was the scale, and how fast it grew: billions in bonds issued within five years of the corporation's creation, on top of the debt the central government and other public corporations were taking on at the same time.

Sources: COFINA. Freeze 2026-08-22.